Friday Morning Livestock Market Update - Continued Cattle Market Pressure Likely

General Comments:

Cash cattle trade through the week has not only been limited and hard to pin down, but overall disappointing given the firm market support over the last couple of months. Prices have continued to erode through the week, posting prices near $104 per cwt in the South on a live basis Thursday, down from $105 per cwt earlier this week and $106 per cwt last week. Limited sales in the North were reported at $165 to $168 per cwt. This is weaker than both last week and trade earlier this week, although it is expected that additional trade is still needed to develop, especially in the North. There is uncertainty over how much short-term market pressure will develop, and if feeders will hold out at the end of the week, hoping for additional support next week. The concern about waiting is that limited activity is expected next week in both cash cattle trade and futures markets leading into the Labor Day weekend. Most of the holiday needs are expected to have already been sourced, creating potential additional pressure both before and after the holiday weekend. This limited timeframe is also one of the main drivers in live cattle price pressure as traders look for increased softness to develop over the next few weeks, in a typical seasonal end-of-summer pattern. Feeder cattle futures appear to have clearly moved past seasonal summer highs as October futures have fallen $8 per cwt the last two weeks. This potential weakness has been expected and talked about over the past month as feeder cattle futures typically peak in late July or early August. Feeder cattle futures peaking two to three weeks later than usual is no significant surprise, given the delayed market activity through the spring and summer.

Mixed trade is expected to develop in lean hog futures Friday. The ability to regain early week pressure and test short-term resistance levels in nearby lean hog contracts is impressive and can be partially attributed to traders fleeing the cattle market, looking for refuge in the lean hog complex. Traditionally the lean hog futures complex has been anything but a "refuge" for traders, but given the seasonal pressure in cattle markets as well as the underperforming nature of hog trade through the entire summer, the hog complex seems like the safest and most underbought market at this point. Given this renewed pressure, there still needs to be caution given to bullish traders who may expect strong market support, as current hog market fundamentals may limit the upside movement in the complex over the next several months. This could quickly allow for traders to jump in and out of the market in the near future. Cash hog prices are expected $1 lower to $1 higher with most bids expected steady to 50 cents higher. Slaughter Friday is expected at 482,000 head. Saturday runs are expected at 277,000.

	BULL SIDE		BEAR SIDE
1)	Boxed beef values continue to slowly but steadily churn higher through the week. The expectation that firm buyer support may continue could help to sustain additional gains through the end of the week.	1)	Active pressure was seen in live and feeder cattle futures during the week. This continues to point to seasonal pressure surrounding and following Labor Day, which traditionally signals a pullback in price levels. The focus now will move to just how much pressure will develop, and if the complex can regain significant support before the end of the year.
2)	Spring 2021 live cattle contracts continue to hold a strong premium to nearby contracts. The focus on firming price levels during the first quarter of 2021 despite increased cattle placements points to expectations of beef demand recovery in the coming months.	2)	Cash cattle trade has yet to become active, but prices have continued to erode through the week. This is expected to limit price support not only this week, but next week as packers and feeders look ahead to the Labor Day weekend.
3)	Nearby lean hog futures continue to move to new short-term highs as traders slowly but steady move into hog futures as cattle markets shift lower. The ability to sustain further buyer support into September is expected to spark additional technical buyer support across the entire complex.	3)	Despite the firmness in lean hog futures, continued large supplies of market-ready hogs are expected to limit aggressive price gains over the near future. This could keep nearby hog futures capped under $60 per cwt over the near future based on pork supply and uncertain demand growth.
4)	Pork cutout values bounced higher Thursday. This has limited the concern that aggressive price pressure may develop in pork values and could bring additional end-of-the-week gains.	4)	Concerns of further price pressure in pork cutout values is likely to limit overall market optimism during late August and early September.

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